Source: Jin10 Data
The US job market appears to have returned to normal and entered a "new normal" state.
In April of this year, the U.S. employment market cleared a crucial hurdle in slowly recovering from the COVID-19 pandemic by returning the Beveridge curve to its position between 2018 and 2019.
The Beveridge curve describes the relationship between job vacancies and unemployment rates. Data released on Tuesday further confirmed a view put forward by Fed Board member Waller in mid-2022 - a view contrary to the idea that inflation can only come down when unemployment rises significantly - that the rise in job vacancies during the COVID-19 pandemic points to another path for the Fed's fight against inflation.
The reduction in job vacancies may cause a slight economic slowdown, which could lower inflation without significant changes in actual unemployment rates. This seems to have happened by April of this year.
However, things have not yet completely settled down. According to the PCE price index preferred by the Fed, the inflation rate in April was 2.7%, which did not reach the Fed's target of 2%. Recent progress in fighting inflation has also been slow. But indicators measuring labor market conditions are looking more and more like they did before the pandemic.
The Beveridge curve is not one of the important economic concepts outside the labor market experts circle, but it has undergone huge changes during the COVID-19 pandemic. The unresolved issue now is whether further progress along the normal part of the Beveridge curve, i.e. a further reduction in job vacancies as the unemployment rate rises, will occur.
As the economy recovers from the pandemic, companies are competing for employees and job vacancies are increasing sharply. However, the ongoing health crisis has dampened people's willingness to work and limited labor supply.
In the spring of 2022, the Bureau of Labor Statistics estimated that there were more than two job vacancies for every unemployed person. Before the pandemic, this number had never exceeded 1.24. By April of this year, this index had returned to 1.24.
For those seeking to negotiate new terms, new jobs, or higher salaries, or simply not show up for work, the COVID-19 pandemic has been the most favorable time to do so, from 'ghost' employers to a wave of retirements. The resignation rate says it all - nearly 3% of the workforce left each month from the middle of 2021 to the middle of 2022, a historic reshuffle of the U.S. labor market.
What has eased the minds of Fed policymakers is that the quit rate has remained at 2.2% for six consecutive months, below pre-pandemic levels.
According to Fed economic forecasts, the U.S. unemployment rate will stabilize at around 4% without causing inflation to rise. But in mid-2018, the unemployment rate dropped below that level, and as the pandemic-induced unemployment rate spike recedes, the unemployment rate has returned to the same trend as before in early 2022.
Whether this represents a 'new' normal where labor demand is relatively high remains to be seen, and the job market may only work better due to technological advances. Regardless, this is another face of the U.S. job market today. The U.S. government will release its non-farm employment report on Friday.
Despite slow population growth, it is still growing, so more job opportunities are needed each month to keep up with population growth. However, the specific number remains controversial. It is estimated to be less than 100,000, but the recent surge in immigration suggests that 200,000 job opportunities may be needed.
However, it is widely believed that the job growth seen during the post-pandemic economic reopening is unsustainable. Population growth has been slowing down, approaching the level of an average of 183,000 people per month for the 10 years before the pandemic.
Editor / jayden